Aug. 27, 2018


Charles Osezua

Nigeria

Charles Osezua

Chairman, Owel-Linkso

“We want to develop more gas plants and gas infrastructure to remain relevant and significant in the gas sector.”

BIO

Engr. Charles Osezua holds a BSc in natural gas engineering from Texas A&M University in 1979, and obtained an MSc in engineering with a split minor in business administration and international law in 1981. He championed a number of the early efforts in the development of gas policies in Nigeria. With 35 years of experience in the industry, he has advised at the highest levels of government and the industry, on technical and policy issues. He has promoted and founded a number of businesses and NGOs including the Owel-Linkso Group, Gaslink Nigeria Limited (Nigeria’s foremost gas utility company), and Gas Train Limited - a gas development company, building gas infrastructure for gas utilization/monetization in the Niger Delta Region. He chairs a number of boards including the Governing Council of the Pan Atlantic University; Educational Co-operation Society (ECS) – the founder of the Lagos Business School (LBS); the Institute for Work and Family Integration (IWFI); and Cordros Capital Limited, Vallourec Oil & Gas Nigeria.

Can you tell us about the core activities of Owel-Linkso?

Our main activities can be classified into two major areas; the gas sector, where we pioneered the first gas distribution company in Nigeria, and the service sector where we provide a number of engineering and technical services to the oil and gas industry. We started our gas infrastructural development from the distribution end through Gaslink, which we promoted and managed as part of Owel-Linkso Group, until we did a share swap with Oando. We have since moved into the mid-stream with a view to capturing gas at the flare, process it and fraction it for distribution. Thus creating a vertically integrated operation for gas production and distribution. Consequently, we created two companies: City Gas, which is purely for gas distribution including LPG, and Gas Train, which today operates its first gas processing plant in Delta State and is probably the only independent gas processing company in Nigeria. These infrastructural development initiatives have been supported by our in-house engineering and project management capabilities. We want to develop more gas plants and gas infrastructure to remain relevant and significant in the gas sector, while extending the services to more companies.

What types of services are provided?

We offer engineering, project management, inspection and certification services significantly, through Linkso Nigeria Limited, which has been involved in all major gas projects in this country. Beginning with the Nigeria LNG, we project-managed the development of the 1bcf/d Soku gas plant. We also managed the West African Gas Pipeline, and today we are managing the Escravos-Lagos gas pipeline. As to your question, we are not EPC contractors as it is not our core business, but we do undertake EPCM where we essentially do engineering, procurement and construction management, while we outsource the actual construction and installation of equipment. This we have done a number of times, installing gas plants for clients, including multinationals who, satisfied with our services, choose us to guarantee the delivery. In all the areas related to gas, I can say, we have been involved from conception to development and operation.

What is your involvement with LNG?

We are not involved in LNG at all, though we are interested in it. Currently, we capture gas at the flare and turn waste into wealth. We process gas that would have been flared, and produce four products: condensate, which is naphtha; LPG, which is household cooking gas; propane, which we sell to industrial and commercial users or blend with butane as domestic gas; and a clean lean gas, which is pipped by the producer to power plants, CNG and mini LNG plant operators. In the future, we see opportunities for engaging in the LNG space, which we are still studying, and intend to take advantage of.

Do you see a great deal of activity and investment coming in the gas infrastructure in Nigeria?

It is inevitable. 30 years ago, we started talking about Ajaokuta-Kaduna-Kano (AKK),and if we had gone ahead with the plan, that pipeline would have been commissioned in 1992. However, the politics and policies of the time, slowed down gas development. But now, driven by the demand for power, politics is beginning to give way to rational policies leading towards a willing seller and willing buyer market. Thus, with policy clarity and consistency, and the right price and economics, investors are more willing to participate, as they see opportunities. The fact remains that investors will invest if they are sure the contract and commercial environment can be trusted and will not change, as was the case in the past. If the regulations cannot guarantee someone a fair return, they will not invest. That's the truth!

How would you assess doing business in Nigeria's gas sector?

Doing business in the Nigerian gas sector is getting better with clearer policies. And I do say that if I look at the LPG sector, that there are advantages of being a local producer, since more often than not, you are competing against imports, so you can save, if nothing else, on transportation cost since the LPG price is tied to international prices. However, in the case of natural gas, the situation is different since its pricing is based on the alternative fuel or feedstock which are generally deregulated. The only exception to this rule may be the power sector which yet regulated. If Nigeria is to develop economically, we have to develop the power sector, and it would appear government has resolved to do so. Gas infrastructure would grow on the back of power sector growth. The private sector can take a lead, as we did in Gaslink, if government puts the right policy in place. We definitely need to be forward thinking in our views and use gas to create an existing economy that supports growth and creates employment for the teeming population.

What policy changes would improve the investment sentiment in the sector?

I believe that the investment sentiment in the sector will change if the fiscal regime to govern investment is streamlined and price is determined on the basis of a willing seller and a willing buyer. The gas business is developed on the basis of long-term relationship, so the laws need to be clear, consistent and enforceable. Nigeria has struggled with this over the years. Thus, we have a situation where gas policies have been established, year in, year out through budgetary pronouncements and instruments, which create uncertainty. On your question about domestic supply obligation, the truth is that the policy has not been very successful. As far as I know today, Total is the only International Oil Company (IOC) who in the last five years have been actively investing to meet their domestic supply obligation of about 300mscf/d. The challenge with the domestic supply obligation still has to do with pricing and the issue of installed capacity not taken, which creates further uncertainty for the investor. However, until they achieve their domestic supply obligations, producers cannot sell gas on a willing buyer, willing seller basis. So they remain under the regulated market which today may not support their investment, hence they are subsidized through various fiscal instruments, including capital allowances, and capital write offs against crude oil tax obligations, etc. The government's domestic supply obligation has not been met by producers because there is no guaranteed off taker. In my view, the solution still remains for government to deregulate the market, as the market will not change radically, but this would allow investors to sit across the table and negotiate appropriate price that will support investment across the value chain, from the consumer, the transporters to the producers. This would ensure that at the end of it all I could sell to a consumer that was able to pay a price that supports my investments.

What is your outlook for 2019?

2019 is an election year, and therefore, for business, it is generally a period of uncertainty and most investors would prefer to hold onto their money. However, we also see an environment where the oil price is creeping up in the right direction. Therefore, we can discuss next year from two perspectives; from the upstream and a service point of view, I see the producers issuing a number of tenders because of the current oil price, but only few contracts will be awarded as they will want to wait for the election period to better understand the government's priorities and their impact on policies. However, on the midstream and infrastructural development, I see the Nigerian National Petroleum Corporation (NNPC) pushing for the completion and realization of a number of gas transportation and transmission system. And because of the quality requirement, this should create opportunities for us in the midstream to build more gas processing plants. So I can say that, next year will be a mixed bag, with a great deal of sluggishness in decision making, and hard work to have existing contracts extended, while working hard to win new tenders which should naturally come out by the third and fourth quarter of 2019.

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